Closure has value in mass litigation. Defendants often insist on it as a condition of settlement, and plaintiffs who can deliver it may be able to command a premium. But in multidistrict litigation (MDL), which currently makes up over one-third of the federal docket, closure depends on individual claimants deciding to participate in a global settlement. Accordingly, MDL settlement designers often include terms designed to encourage claimants to opt in to the settlement and discourage them from continuing to litigate. Some of these terms have been criticized as unduly coercive and as benefiting the negotiating parties — the defendant and the lead lawyers for the plaintiffs — at claimants’ expense. But closure strategies vary widely and operate on claimants in complex ways. This Article examines closure provisions in recent publicly available MDL settlements. It creates a taxonomy of closure strategies, exploring how they work to ensure claimant participation and how they affect claimant choice and welfare. And it closes with a call for MDL judges to take a more active role in supervising and evaluating the terms of global settlements in MDLs.

Adam Zimmerman has posted on SSRN a draft of his article, The Bellwether Settlement, which will appear in the Fordham Law Review. Here’s the abstract:

This Article examines the use of "bellwether settlements" in mass litigation. Bellwether settlements are different from “bellwether trials,” a practice where parties choose a representative sample of cases for trial to determine how to resolve a much larger number of similar cases. In bellwether settlements, the parties instead rely on a representative sample of mediations overseen by judges and court-appointed mediators.

The hope behind bellwether settlements is that different settlement outcomes, not trials, will offer the parties crucial building blocks to forge a comprehensive global resolution. In so doing, the process attempts to (1) yield important information about claims, remedies, and strategies that parties often would not share in preparation for a high-stakes trial; (2) avoid outlier or clustering verdicts that threaten a global resolution for all the claims; and (3) build trust among counsel in ways that do not usually occur until much later in the litigation process.

The embrace of such bellwether settlements raises new questions about the roles of the judge and jury in mass litigation.What do bellwether settlements even mean when the procedures and outcomes lack any connection with a jury trial? What function do courts serve when large cases push judges outside their traditional roles as adjudicators of adverse claims, supervisors of controlled fact-finding, and interpreters of law?

This Article argues that, as in other areas of aggregate litigation, courts can play a vital “information-forcing” role in bellwether settlement practice. Even in a system dominated by settlement, judges can help parties set ground rules, open lines of communication, and, in the process, make more reasoned trade-offs. In so doing, courts protect the procedural, substantive, and rule-of-law values that aggregate settlements may threaten.

The House of Representatives Committee on Rules has announced that it will meet the week of March 6 “to grant a rule that may provide a structured amendment process for floor consideration of” H.R. 720 (amendments to FRCP 11), H.R. 725 (on so-called “fraudulent” joinder), and H.R. 985 (on class actions and MDLs).

In addition to the six bills already reported here and here, House Republicans have also introduced H.R. 1118, the so-called “Innocent Sellers Fairness Act,” which would federalize the law of product liability by limiting liability for the sellers of a product. The bill is sponsored by Rep. Blake Farenthold (R-TX 27), Rep. John Duncan (R-TN 2), and Rep. Lamar Smith (R-TX 21).

The operative provisions of the bill provide:

(a) In general

No seller of any product shall be liable for personal injury, monetary loss, or damage to property arising out of an accident or transaction involving such product, unless the claimant proves one or more of the following activities by the seller:

(1) The seller was the manufacturer of the product.

(2) The seller participated in the design of the product.

(3) The seller participated in the installation of the product.

(4) The seller altered, modified, or expressly warranted the product in a manner not authorized by the manufacturer.

(5) The seller had actual knowledge of the defect in the product as a result of a recall from the manufacturer or governmental entity authorized to make such recall or actual inspection at the time the seller sold the product to the claimant.

(6) The seller had actual knowledge of the defect in the product at the time the seller supplied the product.

(7) The seller intentionally altered or modified a product warranty, warning or instruction from the manufacturer in a way not authorized by the manufacturer.

(8) The seller knowingly made a false representation about an aspect of the product not authorized by the manufacturer.

(b) Liability of seller in cases of negligence

If the claimant proves one or more of the activities described in subsection (a) and such activity was negligent, the seller’s liability is limited to the personal injury, monetary loss, or damage to property, directly caused by such activity.

When transferee judges receive a multidistrict proceeding, they select a few lead plaintiffs’ lawyers to efficiently manage litigation and settlement negotiations. That decision gives those attorneys total control over all consolidated plaintiffs’ claims and rewards them richly in common-benefit fees. It’s no surprise then that these are coveted positions, yet empirical evidence confirms that the same attorneys occupy them time and again.

Anytime repeat players exist and exercise both oligopolistic leadership control across multidistrict proceedings and monopolistic power within a single proceeding, there is concern that they will use their dominance to enshrine practices and norms that benefit themselves at consumers’ (or here, clients’) expense. Apprehensiveness should increase when defense lawyers are repeat players too, as they are in multidistrict litigation. And anxiety may peak when the circumstances exhibit these anti-competitive characteristics, but lack regulation as they do here. Without the safeguards built into class certification, judicial monitoring and appellate checks disappear. What remains is a system that may permit lead lawyers to act, at times, like a cartel.

Four bills have been introduced in Congress that would limit plaintiffs' access to the courts. The title of each bill is misleading, in that the effect of each bill would be very different from what its title indicates.

incidentally speculates on the relationship between MDL case assignment, the potential loss of judgeships in a district, and the strictness of a district judge’s scrutiny of attorneys’ fees in class action settlements.

This class action, based on Massachusetts consumer law, alleged that Michaels “asked customers for their zip codes as part of credit card transactions to reverse engineer those customers' addresses using commercially available databases, and then used those addresses to carry out aggressive and unwanted marketing campaigns.” [Internal quotation marks omitted.] After Michaels moved to dismiss, the federal court certified legal questions to the Supreme Judicial Court of Massachusetts, which held plaintiffs’ allegations sufficient under state law.

After discovery, the parties settled and the court approved the settlement, reserving a ruling on class counsel’s request for fees. Under the settlement, class members were to receive a $10.00 or $25.00 “voucher” to be used on any merchandise in Michaels’ physical stores, with certain restrictions on use. The face value of the vouchers was $418,000.00. The value of the vouchers actually redeemed by class members was $138,620.00.

Class counsel requested fees and costs of $425,000.00, asserting that Massachusetts law, not CAFA, governed the fees request because the vouchers were not “coupons” as used in CAFA, 28 U.S.C. § 1712, which applies to settlements that “provide[] for a recovery of coupons to a class member.” Surprisingly, CAFA does not define “coupon.” Surveying other cases, the Court “essay[ed] such a definition: when class members must transact business with the defendant to obtain the benefit of the settlement, the settlement ‘provides for a recovery of coupons’ under section 1712. In other words, coupons must be redeemed; conversely, if an award must be redeemed, it is a coupon.” Under that definition, the Michaels vouchers were coupons, and section 1712 applied to the fees request.

That didn’t settle the matter, however, because section 1712 is bewilderingly drafted. (I won’t reprint it here: just read subsections (a), (b), and (c), if you dare, and see if you can decipher them.) Again after surveying other cases, the Court held that even in a coupon-only settlement, section 1712 “vests the Court with the discretion to choose between using a percentage-of-coupons-redeemed method, or the lodestar method.”

Here, the Court chose the lodestar method (attorney hours worked times hourly fee) for two reasons: “[f]irst, class counsel vindicated the important public policy goals of Massachusetts' consumer protection statute,” and “[s]econd, and most importantly, they obtained binding precedent from the Supreme Judicial Court that will influence conduct far beyond that of Michaels.” However, the Court warned:

Given the hostility to disproportionately large fee awards to class counsel evident in the legislative history -- at least insofar as fees generated from obtaining coupon settlements were concerned -- counsel may reasonably expect that this Court will generally award attorneys' fees based on a percentage of the actual value of the coupons redeemed by class members, absent the groundbreaking nature of this case.

[Footnotes omitted.]

The Court found that the requested hourly fee of $650.00 for partners was unreasonable, and cut it to $350.00. This yielded a lodestar of $312,895.00 in attorneys’ fees, which was awarded along with $14,005.30 in costs.

In other words, the fees award, even though reduced from what was requested, still ended up being more than twice as much as the value of the vouchers actually redeemed by class members. Personally, I have no problem with that: in my opinion, the primary purpose of the consumer class action is not to compensate the plaintiff class, but to hold the defendant accountable for violating the law. Others obviously disagree.

Here’s where the Court’s two-page footnote 29 comes in. The Court’s point appears to be this: at least one pro-business advocacy group has argued to the Judicial Panel on Multidistrict Litigation that the Panel’s decision where to send an MDL should “rest on a district judge’s strict scrutiny of claims for attorneys’ fees in class action settlements.” In other words, business interests have argued that the more strictly a district judge scrutinizes fees requests, the more that judge should be favored as the transferee court in an MDL. But why should judges want to be the transferee court in an MDL? Because all of those transferred cases will now be counted as part of that judge’s, and that district’s, civil caseload. (When a civil case is filed in one district, and transferred to another district for whatever reason, including MDL, it is counted as a filing in both the transferor and the transferee court. So, for example, if the Panel transfers 5,000 MDL cases to another district, the transferee district gets 5,000 cases added to its total filings.) This accrual of cases “tend[s] to immunize that court against the potential loss of a judgeship,” because recommendations by the Judicial Conference to add or subtract authorized district court judgeships are based in part on the number of case filings that district has.

So the Court in Tyler candidly “confess[ed] that, when awarding attorneys' fees in this case, it contemplated -- but rejected as wholly inappropriate -- an additional consideration: the views of the Judicial Panel on Multidistrict Litigation.”

Following the judiciary's experience with aggregate litigation in the 1960s, Congress established a procedure for the transfer of related cases to a single district court for coordinated pretrial proceedings. Originally designed to achieve efficiencies associated with coordinated discovery, the multidistrict litigation (MDL) process evolved from a rather modest starting point to become a central part of aggregate litigation in the federal courts today. Despite its importance, however, there is little empirical research on the MDL process. This article seeks to fill this gap in the empirical literature by addressing a few central questions about the work of the Judicial Panel on Multidistrict Litigation (Panel). Using a unique database, we examine how that body decided motions to centralize multidistrict litigation. We find, most importantly, that the Panel became more likely to order centralization of proceedings over time, after controlling for other factors. That trend is not, however, apparent in the most recent years' data. We also find, all else equal, that the Panel is more likely to centralize a proceeding including class allegations, and more likely to centralize proceedings raising certain kinds of claims.

Back at the end of last Term we covered the Supreme Court’s grant of certiorari in Gelboim v. Bank of America (No. 13-1174). This week the Court issued a unanimous opinion in Gelboim, authored by Justice Ginsburg. Here’s how she teed things up:

An unsuccessful litigant in a federal district court may take an appeal, as a matter of right, from a “final decisio[n] of the district cour[t].” 28 U.S.C. §1291. The question here presented: Is the right to appeal secured by §1291 affected when a case is consolidated for pretrial proceedings in multidistrict litigation (or MDL) authorized by 28 U.S.C. §1407?

The Court’s answer: No. Plaintiffs whose action was consolidated for pretrial MDL proceedings could still appeal the dismissal of their action, even though other cases in the MDL remained pending. It was not necessary for such plaintiffs to obtain authorization to appeal via Federal Rule of Civil Procedure 54(b).

In footnote 4, though, the Court reserved judgment on whether it would reach the same conclusion when cases were “combined in an all-purpose consolidation,” as opposed to an MDL consolidation for pretrial purposes only. (Not as glamorous as footnote 4 of Carolene Products, but worth keeping an eye on.)

For more, Howard Wasserman has an analysis of the opinion over at SCOTUSblog.

Each state and federal court might have
its own inviolable power to adjudicate cases and issue orders within its
territory. But that does not stop judges from cooperating in the face
of mass-tort litigation that arises both in state and federal court.

U.S. District Judge Barbara Jacobs Rothstein,
of the Western District of Washington and a visiting judge to the U.S.
District Court for the District of Columbia, said that for many years
input was not obtained from state-court judges, but that has changed.

The number of mass torts filings in the United States hasn't seen a precipitous drop-off, but profit margins for the law firms defending those cases have taken a hit.

A confluence of events over the past five years has caused mass torts work, namely in the pharmaceutical space, to face increasing rate sensitivity. That has caused firms to either reconfigure their mass torts practices or de-emphasize the work altogether. Even some still involved with defending mass torts now use the once lucrative work more as a springboard for other assignments in practice areas facing less rate pressure.

These
class actions (consolidated in an MDL in Minnesota) are notable for the whimsical names of their subclasses, the Soggy
Plaintiffs and the Cloggy Plaintiffs.
The Eighth Circuit upheld the settlement of several class actions
alleging damage caused by defective brass
plumbing fittings sold by defendants Radiant and Uponor. The Soggy Plaintiffs have already experienced
leaking (in some cases causing severe damage) and the Cloggy Plaintiffs have
not yet experienced leaks but have the same fittings. "The proposed settlement agreement
stipulated that after two leaks, soggy plaintiffs would be entitled to have
their entire plumbing system replaced at Uponor and Radiant's expense. Cloggy
plaintiffs who had demonstrated 'by way of a flow test that a differential
in water flow . . . of more than 50% [exists] between the hot and cold
lines' would also be entitled to replacement of their brass fittings, and
if that proved insufficient, to a new plumbing system." After
notice of the proposed settlement had been sent, Ortega, a California resident,
moved to intervene as of right. His motion
was denied as untimely. He and 26 other
class members then objected to the settlement, arguing that notice had been
deficient, that the scope of the release of defendants was overbroad, and that
the settlement did not account for a cause of action available under California
law. All of these arguments were
rejected and the district court's approval of the settlement was upheld. In re Uponor, Inc., F1807 Plumbing Fittings Products Liability Litigation, No. 12-2761 (8th Cir. June 7, 2013).

The Third Circuit has upheld the dismissal of twelve plaintiffs' claims in the Asbestos MDL for failure to comply with an administrative order requiring them to include specific histories of their exposure to asbestos. The first paragraph of the opinion is:

This appeal comes to us from Multidistict Litigtion case number 875 ("MDL 875"), otherwise known as the "Asbestos MDL," involving asbestos cases from around the country, pending before Judge Robreno in the United States District Court for the Eastern District of Pennsylvania. The District Court, overseeing several thousand asbestos cases, dismissed the claims of twelve Plaintiffs pursuant to Rule 41(b) of the Federal Rules of Civil Procedure based on non-compliance with the District Court's Administrative Order No. 12 ("AO 12"). Specifically, Judge Robreno determinated that the Plaintiffs' submissions were fatally flawed in that they failed to include specific histories of Plaintiffs' exposure to asbestos. Plaintiffs contend on appeal, as they did in the District Court, that AO 12 did not impose this requirement, and urge, alternatively, that even if it did, under a proper balancing of the factors we outlined in Poulis v. State Farm Fire and Casulaty Company, 747 F.2d 863 (3d Cir. 1984), dismissal with prejudice was not warranted. For the reasons discussed below, we will affirm the District Court's dismissal of the twelve cases at issue.